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Hachette pushing Amazon for price hike, to take Apple model

updated 08:15 am EST, Fri February 5, 2010

Hachette echoes Macmillan in e-book price war

Hachette today followed Macmillan's pricing strategy and said it would raise prices on its e-books. The approach will use the agency model where the publisher, not the retailer, sets the prices. It will notably use the Apple price scheme and ask between $13 and $15 for new and bestselling titles as well as change prices over time, with some older and shorter titles costing as little as $6.

The move effectively forces Amazon to raise the prices on Hachette's books at the Kindle store beyond their existing $10. Although yet to return Macmillan's books to the service, Amazon has said it would reluctantly increase prices after that publisher's demands and would let customers decide whether the increases are worthwhile. The online bookseller is unlikely to have a choice as it would suffer a severe blow in risking the loss of more than one publisher.

Both calls for change come just after Apple has unveiled the iPad and suggest that publishers are using the new book-friendly device as an opportunity to escape what they have seen as a constrictive pricing model at Amazon. Although they will sometimes make less money since Apple isn't paying a wholesale-level price to publishers, the move gives Hachette and others control over how their books are priced and thus will let them charge more if it becomes necessary. The Kindle approach sells books at a loss to Amazon and gives publishers little room to ask for more since Amazon is unlikely to deepen its losses further to maintain the $10 price.



By Electronista Staff
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Comments

  1. danviento

    Fresh-Faced Recruit

    Joined: Dec 2005

    +2

    The Future of Controllers of eBook Prices?

    With the iPad, the book publishers may have a real tool to make eBooks sell in large volume. That assumes iPad becomes the rage people are hoping for. Does anyone think they'll ever go for the more sales at large volume and lower price point if the iPad becomes a hit?

    So far, even with the plethora of overhead costs lopped out of the loop, publishers still want to charge near-hardcover rates for digital copies of books AND overload them with DRM. Something would have to change their mind.

    With music labels, Apple took a hard stance from the get-go on a single-line price for everything that the iTMS carried. This along with the store's success became a bargaining chip for Apple to keep the content at that price. Apple is obviously not taking that tact here, so it probably won't have the ability to lower prices or get rid of DRM on its own unless it changes the terms of future contracts.

    This leaves it up to a publisher with a wildly popular product to go for the large volume/low price business model and win out over the opposing model to change minds in the publishing industry.

    In terms of DRM, publishers don't yet have to deal with piracy of alternative products; it takes a investment of a little money and a fair amount of time to get a paper book to a digital copy as you would a CD into your computer's music library. However, as we have seen repeatedly with digital music, and already with some eBooks, prohibitive DRM is always eventually broken.

    I think it'll be interesting to see if its the artificial controller- Apple, or the market that drives popular business models in this industry in the future.

  1. iphonerulez

    Fresh-Faced Recruit

    Joined: Nov 2008

    0

    Apple hasn't sold one iPad yet

    and it's starting to dictate more pricing control than Amazon's Kindle which has already sold about 2 million units. I know publishers certainly want more money and they are putting a lot of faith in the iPad as being a very popular item with likely higher sales than the Kindle. It appears the Kindle's only-game-in-town status is at an end. Eventually the consumers will dictate how much they're willing to pay for digital books after many other tablets are released to consumers.

  1. James Katt

    Fresh-Faced Recruit

    Joined: Mar 2008

    0

    Amazon makes money on Kindle

    Amazon sells an Ebook for about $10.
    It pockets 70 % ($7) and it gives 30 % ($3) to the publisher.
    It earns the lion's share of the revenue from each eBook it sells.

    How can it state that it is losing money on eBooks? It simply does not.

    The publisher is on the short end when selling Ebooks by Amazon's revenue model.

    With Apple, for a $15 eBook, the publisher gets $10.50 (70 %) and Apple gets $4.50 (30%).

    For a $28 hardback, a publisher gets $14 in revenue - which is then reduced by the overhead of printing the book.

    With Apple, the publisher gets $10.40 for the eBook version. This is very close to what they would get for selling the hardback.

    This is far more than the $3.00 they get from Amazon for selling the same book.

  1. bauhaus

    Fresh-Faced Recruit

    Joined: Sep 2003

    -1

    wrong way around

    Publishers get the 70% and Amazon get the 30%.

  1. shawnde

    Fresh-Faced Recruit

    Joined: Apr 2008

    +1

    Payback is b*tch

    I guess what you do to others ... others will do to you.

    I'm referring to Amazon's MP3 Music store, which went in bed with the labels, to start the "variable pricing" system for music, where you had [most] songs that were over 99 cents, and a select few below 99 cents. This allowed Amazon [at the discretion of the labels] to bring DRM-free music to the masses, and therefore exert pressure on Apple to follow suit ... Well Apple did, and the music landscape has changed completely since last year.

    Now Apple is doing EXACTLY the same thing to Amazon, by ganging up with the publishers [labels] and doing this variable pricing scheme, where eBooks CAN be sold for over $10 ... "What a preposterous idea ... who came up with $10 as a cap?" the 'agency' would say (as did the labels before them). "We should be able to sell NEW RELEASES for $20 !!!"

    I'm sure with the help of Apple (and against the will of Amazon), they will do exactly that, and in a year's time, we'll all forget that eBooks used to cost less than $10.

    Frankly, I think eBooks should all cost less than $5 or even less than $3 ... there is practically no overhead, no material cost, no shipping, no storage, nothing !!! just a glorified PDF .... these people are gouging their own customers. eBooks even take up much less storage and bandwidth to sell. $13-$15 is just ridiculous .... as is $1.29 for a song.

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